Gold Falls on CPI Data; Silver Retreats from 2-Month High

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"Participants were eyeing the state of intensity of risk appetite as the week winds down."

Gold futures fell Friday and headed for their first weekly loss in five, as U.S. consumer prices showed the sharpest YOY decline in nearly 60 years during July, reducing the precious metal's appeal as an inflation hedge.

Also weighing on gold, the dollar turned higher against most of its major rivals, curbing gold's attractiveness as an alternative investment. A stronger U.S. currency also pushed down silver, which climbed above $15 an ounce earlier in the session to hit a two-month high.

On the Comex division of the New York Mercantile Exchange, December gold futures, the most active contract, dropped $8.10, or 0.8%, to $948.40 an ounce. The less active August contract fell $10, or 1.1%, to $944.70. The contract is heading for a weekly loss of more than 1%.

Silver for September delivery lost 31.2 cents, or 2.1%, to $14.675 an ounce, undercut after hitting $15.185, the highest level since June 11.

"Participants were eyeing the state of intensity of risk appetite as the week winds down," said Jon Nadler, senior analyst at Kitco Metals Inc. "Gold remains in a position to have to recapture the value zone that lies above $965 in order to erase the memory of its worst price slide since March."

Gold had suffered a four-day losing streak across the latter half of last week and running through Monday, the longest since early March.

Holdings in iShares Silver Trust, the biggest silver ETF, stood at 8,824.67 metric tons on Thursday, back near the record high of 8,828.14 metric tons hit in late July.

Holdings in SPDR Gold Trust have been decreasing. They stood at 1,065.49 metric tons, down nearly 70 metric tons from the record above 1,134 metric tons from early June

"Thanks to its widespread industrial use, silver benefits, even more than gold, from current economic hopes," said analysts led by Barbara Lambrecht at Commerzbank, in a note. "Furthermore, in contrast to gold, investors continue to show strong interest in silver."

Among other metals, October platinum fell $12.70, or 1%, to $1,260 an ounce, while September palladium lost $1.65, or 0.6%, to $276.50 an ounce.

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